Marks and Spencer : Governance 2021

GOVERNANCE

CHAIRMAN'S

GOVERNANCE OVERVIEW

"The Board's primary objective has been to navigate the business through this"time of uncertainty.

Archie Norman, Chairman

As I've already noted in my Chairman's letter on pages 2 to 3, the events

of this past year have left a profound mark on the business - changing how our customers choose to shop and the way that we operate as a result, and having an impact on our ongoing strategic priorities.

The Board's primary objective has been to navigate the business through this time of uncertainty, ensuring that we emerge in a strong position, having continued to drive forward with our strategy despite the persistent difficulties. It has been essential for us to be highly engaged, flexible with our time to support and challenge senior leadership, and committed to securing the financial stability underpinning our recovery and accelerated transformation into 2021 and beyond. We, of course, continue to fulfil our other core duties to oversee M&S's culture, governance, financial controls, risk and change management.

The Governance section that follows is by intention concise, in keeping with our approach in previous years. Further detail on the Board, its Committees and our governance framework are available at marksandspencer.com/thecompany.

CONDENSED GOVERNANCE

We noted last year the significance of the scale and pace with which the Board had coordinated the Company's response to the Covid-19 pandemic (detailed on pages 50 to 53 of our 2020 Annual Report).

That pace and agility has continued through this year, with the Board joining weekly calls right up until March 2021, to collaborate with, support and guide senior management.

Elsewhere in the business, operating processes and management forums have been consolidated, and the number of opportunities for discussion have been increased, to allow for proactive engagement between the Board and its Committees, the Executive Committee and senior management. Ultimately, this is improving our responsiveness and streamlining

our decision-making processes.

An outline of our governance framework and how these bodies interacted during the year can be found on page 60. The reports of the Audit, Nomination and Remuneration Committees for 2020/21 are available on pages 77 to 83, 71 to 72, and 84 to 105 respectively.

A BALANCED BOARD

We saw substantial change during the year on our Board and executive team. Two new non-executives, Sapna Sood and Tamara Ingram, joined us last June, as did our new Chief Financial Officer, Eoin Tonge. Alison Brittain and Katie Bickerstaffe stepped down from the Board at the 2020 AGM last July, with Katie having joined our Executive Committee as Chief Strategy and Transformation Director. Richard Price also joined the executive team in July 2020 as Clothing & Home Managing Director.

In February 2021, Evelyn Bourke joined our Board as a non-executive director, while Pip McCrostie retired from the Board in March. She left us with our very heartfelt thanks for her candour, insight and committed contribution to the Company. We were saddened to hear that she passed away after leaving the Board, and we offer our condolences to her family.

More recently, we have welcomed Fiona Dawson as a non-executive director to the Board, and look forward to working with her in the years ahead.

With these considerable changes,

and noting that his tenure is approaching nine years, we are pleased that Andy Halford will be staying with us for an additional year. Having reviewed and established that Andy remains independent, the Nomination Committee agrees that his role as Senior Independent Director is an important constant while new Board members settle into their roles.

Full details of these Board and executive changes, and our talent and succession processes, can be found in the Nomination Committee Report. Board and Executive Committee biographies and our assessment of the balance of skills

and experience on these bodies can be found on pages 62 to 65.

58 Marks and Spencer Group plc

Last year's digital AGM

Last year's AGM was the Board's most engaging and constructive yet because we were able to reach shareholders directly in their homes.

Change has not been limited to the Board and senior leadership this year though. The refreshed Executive Committee has prioritised a review of talent, development and succession throughout the business, supported by the Nomination and Remuneration Committees, and more detail can be read in the respective Committee reports.

Since the financial year end, the Executive Committee has also realigned itself and its member responsibilities. As announced on 18 May 2021, Katie Bickerstaffe and Stuart Machin have become Joint Chief Operating Officers, adding additional oversight and impetus to our core businesses, while Eoin Tonge is

now responsible for strategy and transformation planning as part of his CFO remit. The overall composition and duties of the Committee remain unchanged.

BOARD ACTIVITIES AND CONSIDERATION OF STAKEHOLDERS

The Board's focus during the year has been to accelerate the Company's pursuance of its strategic priorities, while managing the ongoing uncertainties associated with Covid-19 and Brexit. In our weekly calls, we have heard updates on operating challenges and advised on proposed measures to address them urgently. In our formal monthly meetings, we have been presented with "strategic deep dives" by all areas of the business, which we have then considered, debated and challenged. All while being mindful of the impact of any decisions made on the business' various stakeholders and on its long-term, sustainable success, in line with Section 172(1) of the Companies Act 2006 ("s.172(1)").

Our colleagues in particular were significantly impacted by our decisions this year. We placed thousands of colleagues on furlough, rewarding those continuing to work in stores with a 15% uplift in pay and those in our support centres with an equity grant of 5% of salary for the first lockdown period. There were, of course, unfortunate job losses as a result of our organisational restructure, but these were necessary to right-size the business for a post-Covid world.

An overview of the range of matters that the Board discussed and debated at its meetings during the year can be found on pages 66 to 67, with examples of the Board's key decisions and s.172(1) considerations on pages 68 to 69.

The Company's s.172(1) statement is available on pages 34 to 36.

CREATION OF AN ESG COMMITTEE

In the latter part of the year, the Board and Executive Committee's attention was drawn to the refresh of our Plan A sustainability programme. In part prompted by the events of the last year, we have agreed that it is imperative to ensure that Plan A is once again central to our customer story, so that we can continue to help our colleagues, customers and communities lead happier, healthier and more fulfilling lives.

The Board's Environmental, Social & Governance ("ESG") Sub-Committee was established to assist the Board in providing focus and oversight of the Plan A programme, both in its reinvigoration and its ongoing effectiveness. The report of the ESG Committee for 2020/21 is available on pages 73 to 76.

DIVIDEND

Whilst a difficult decision, we continue to agree, in line with our approach last year, that non-payment of a dividend is appropriate for the 2020/21 financial year. This continues to be one of the proactive steps we have taken to strengthen our balance sheet and maximise liquidity for our recovery beyond the pandemic.

DIGITAL AGM

We know our Annual General Meeting ("AGM") provides investors with a valuable opportunity to communicate with us.

In recognition of this, and building on the unprecedented success of last year's meeting, we will be conducting this year's AGM digitally once again. In addition to being able to vote and submit questions electronically in advance, all shareholders will be able to join the meeting online to hear from Steve and me, ask questions and vote on our resolutions.

This year, we'll be joined by Kamal Ahmed who will be acting as your shareholder advocate, sharing your views and questioning me and the Board on your behalf. If you would like us to hear from you directly, you also have the option of submitting a video question to be played to the Board for response during the meeting. I look forward to hearing from you all then.

Information on how to participate electronically, both in advance and on the day, can be found on pages 207 to 209.

Archie Norman, Chairman

UK CORPORATE

GOVERNANCE CODE

The UK Corporate Governance Code 2018 (the "Code") which is available to view on the Financial Reporting Council's website is the standard against which we measured ourselves in 2020/21.

The Board confirms that we complied with all of the provisions set out in the Code for the period under review.

Details on how we have applied the principles set out in the Code and how governance operates at M&S have been summarised throughout the Directors' Report. Our full Corporate Governance Statement outlining our compliance is available on marksandspencer.com/ thecompany.

GOVERNANCE

Annual Report & Financial Statements 2021

59

LEADERSHIP AND OVERSIGHT

During 2020/21 and dealing with the evolution of the Covid-19 pandemic, our governance framework was significantly compressed to increase our responsiveness to the changing situation and streamline our decision-making process.

With an increase in the frequency of Board meetings and a rationalisation of the number of operating meetings and management processes, the Board and its Committees, the Executive Committee and senior management were able to collaborate proactively, consider issues and respond in the face of unprecedented uncertainty.

  BOARD COMMITTEES

The Board is supported by its subcommittees in discharging its duties. Following each Committee meeting the Chairs of the Committees provide an update on their activities at the next Board meeting.

Audit Committee

see p77-83

Responsible for monitoring the integrity of the financial statements, reviewing the Group's framework of internal controls and maintaining the auditor relationship.

Remuneration Committee see p84-105

Responsible for remuneration policy, performance-linked pay schemes and share-based incentive plans.

Nomination Committee

see p71-72

Responsible for reviewing Board composition and diversity, proposing new Board appointments and monitoring the Board's succession needs.

ESG Committee

see p73-76

Responsible for ensuring the Company's ESG strategy remains fit for purpose and that plans are in place and reported on.

Disclosure Committee

Responsible for determining the disclosure treatment of material information and identifying inside information for the purpose of maintaining the Company's project (insider) lists.

As with the Board and ExCo, the Board's sub-committees have adapted to the business' need for more responsive decision-making, often meeting or reviewing proposals outside of its usual meeting cycles.

  BOARD

The Board is responsible for establishing the Company's purpose, values and strategy, promoting its culture, overseeing its conduct and affairs, and for promoting the success of the Company for the benefit of its members and stakeholders. It discharges some of its responsibilities directly and others through its sub-committees.

Terms of Reference for the Board and its sub-committees are available in our Governance Framework, published on marksandspencer.com/the company.

Execution of the strategy and day-to-day management of the Company's business is delegated to the ExCo, and subsequently to senior leadership forums where relevant, with the Board retaining responsibility

for overseeing, guiding and holding management to account.

In addition to its monthly scheduled meetings, this year the Board met and heard from the ExCo and senior management on a regular basis - sometimes weekly - over the phone or by video call for faster, more efficient decision-making and reactiveness. With the UK government's roadmap out of lockdown under way and progressing well, the Board held its last weekly board call on 25 March 2021.

	BOARD
BOARD	Governance EXECUTIVE
COMMITTEES	at M&S	COMMITTEE

SENIOR

LEADERSHIP

FORUMS

  EXECUTIVE COMMITTEE

The Executive Committee ("ExCo") is the leadership team responsible for executing strategy, by managing, monitoring and providing executive input to support the Company's strategic and operational decisions, ensuring strong executive alignment on business priorities and actions, including business case investments.

The ExCo's authority is conferred on it by the Group Delegation of Authority, as approved by the Board.

Consisting of the CEO, CFO, Chief Operating Officers, and the Managing Directors of each business unit, the ExCo reviews strategic opportunities and initiatives from the five key businesses and Group centralised functions, ensuring that these align with the overarching strategy as mandated by the Board. In addition, and in support of the Board's purpose, values and culture setting, the ExCo is responsible for all colleague matters, including the structure and operation of the HR function throughout the business, the development and monitoring of culture and values, and reviewing talent and leadership development and succession plans below ExCo level. Post year-end, the division of responsibilities within the ExCo changed, as announced on 18 May 2021. However, the overall composition and duties of the Committee remain unchanged.

Having been established as part of our Never the Same Again programme, drawing on learnings from the Covid-19 crisis and capitalising on the opportunities, the ExCo (formerly the Operating Committee) has remained in constant contact, meeting as and when required to respond quickly to the changing situation. Initially on a weekly basis, as the crisis has transitioned to being the new normal and with the business set up to succeed with new operating procedures, this has moved to monthly meetings.

  SENIOR LEADERSHIP FORUMS

Underlying this more agile governance feedback loop between the Board, its sub-committees and the ExCo, there are forums comprising senior management that support each of these governing bodies. This year, as part of the Never the Same Again programme and introduction of the ExCo, the previous 'Boards' for each of the business units have been removed in favour of more focused 'Operating Review' meetings with streamlined memberships. Their main remit is for management of key trading and operational matters, with decision-making delegated to them by the Group Delegation of Authority and underpinned by business unit Delegations of Authority.

Additional forums have been established and disbanded throughout the year as part of our more responsive governance framework, with the intention of supporting specific projects, business needs, or strategic priorities, and meeting as and when required. Examples include:

Property Committee

For reviewing and approving property investments.

Digital Board

For driving the Company's Digital First agenda across the Group.

Brand Forum

For reviewing use of the M&S brand, as well as considering use of third-party brands.

Crisis Management Team

For determining and directing actions required in response to crises. This team was especially prominent during the first Covid-19 lockdown, which we explored on pages 50 to 53 of our 2020 Annual Report. The team has since been demobilised until another crisis requires it

to reconvene.

People Forum

For driving the People and Culture agenda across the Group.

Compliance Monitoring Committee

Newly established to support the Audit Committee's oversight of credit broking activities within the Group, as regulated by the Financial Conduct Authority.

60 Marks and Spencer Group plc

GOVERNANCE

BOARD COMPOSITION

AND MEETING ATTENDANCE

BOARD MEETING ATTENDANCE AND DIRECTOR RESPONSIBILITIES IN 2020/21

During the year, the Board held 11 scheduled	and when required, typically on a weekly basis	non-executive directors to discuss any
meetings and an additional 12 Board calls in	throughout the year.		matters arising.
response to the Covid-19 pandemic, for		Sufficient time is provided, periodically,	For information on what the Board did
which individual attendance is set out below.
for the Chairman to meet privately with the	during the year, see p66-69.
Additional unscheduled meetings were held as
Senior Independent Director ("SID") and the
	Attended	Max possible			Linked to
CHAIRMAN	Scheduled	Additional	Scheduled	Additional Independent	Responsibility in 2020/21	remuneration
Archie Norman*	11	12	11	12		Board governance and performance,
						shareholder engagement.

• Considered independent on appointment.
  EXECUTIVE DIRECTORS

Chief Executive	11	12	11	12	Strategy and Group performance.
Steve Rowe
Chief Financial Officer	9	2	9	2	Group financial performance, investor relations and
Eoin Tonge					risk management.
(appointed 8 June 2020)
NON-EXECUTIVE DIRECTORS					Role at Board meetings
Full Year					Independent non-executive directors assess, challenge and monitor the
Andrew Fisher	11	12	11	12	executive directors' delivery of strategy within the risk and governance
					structure agreed by the Board.
Andy Halford	11	12	11	12
As Board Committee members, directors also review the integrity of
Justin King	11	12	11	12
the Company's financial information, consider ESG issues, recommend
Retired in 2020/21					appropriate succession plans, monitor Board diversity and set the
Katie Bickerstaffe	3	9*	3	10	directors' remuneration.
Alison Brittain	3	10	3	10
Pip McCrostie	11	12	11	12
Appointed in 2020/21	9		9
Sapna Sood	6	6
Tamara Ingram	9	6	9	6
Evelyn Bourke	2	-	2	-

* Unable to attend one meeting due to other business commitments.

STANDING ATTENDEES					Responsibility
Nick Folland -	11	12	11	12	Advising the Board on all legal and corporate governance issues, including
General Counsel and					sustainability and Plan A.
Company Secretary
David Surdeau -	3	10	3	10	Led the Finance function and attended Board meetings in line with the
Interim Chief					responsibilities of the Interim CFO.
Finance Officer*
* Resigned June 2020.
ATTENDED BY INVITATION					Role at Board meetings
Sacha Berendji	9				The ExCo comprises the Company's senior leadership team below Board level
Katie Bickerstaffe*	6				and is tasked with running the day-to-day operations of the business and
					facilitating delivery of the strategy as approved by the Board. Members of the
Paul Friston	4
			ExCo attend Board meetings by invitation to present and discuss matters of
					strategic importance.
Stuart Machin	8
					Direct Reports to ExCo members also attend Board meetings by invitation as
Richard Price	6
			and when input is required on their specific areas of expertise.

* Became Chief Strategy and Transformation Director (post year-end, Chief Operating Officer), and stepped down from the Board in July 2020.

Note: The tables above provide details of scheduled meetings held in the 2020/21 financial year and additional Board calls in response to the Covid-19 pandemic.

GOVERNANCE

Monitoring non-executive director independence

The Board reviews the independence of its non-executive directors as part of its annual Board Effectiveness Review. The non-executive directors also meet annually, led by the SID, to conduct the Chairman's appraisal. The results of the meeting are then fed back to the Chairman by the SID.

The Chairman was considered to be independent on appointment and is committed to ensuring that the Board comprises a majority of independent

non-executive directors who objectively challenge management, balanced against the need to ensure continuity on the Board.

The Company maintains clear records of the terms of service of the Chairman and non-executive directors to ensure that they continue to meet the requirements of the UK Corporate Governance Code. Neither the Chairman nor any of the non-executive directors have exceeded the maximum nine-year recommended term of service set out in the Code,

with our longest-servingnon-executive director, Andy Halford, having served on the Board since January 2013.

As such, the Board considers that all of its non-executive directors continue to demonstrate independence.

  For information on the skills and experience of each director, see p62-p64. For more information on director tenure see p72.

Annual Report & Financial Statements 2021

61

GOVERNANCE

OUR BOARD

Archie Norman

N R

Chairman

Appointed: September 2017

Career and external appointments: Archie is an experienced Chairman and former Chief Executive having led major transformation programmes at ITV, Lazard, Asda, Energis and Hobbycraft. He was previously Deputy Chairman of Coles Limited, and was the Lead Director at the Department for Business, Energy & Industrial Strategy from 2016 to 2020. Archie is also the Chairman of Signal AI and Non-ExecutiveVice Chairman of Global Counsel.

Steve Rowe

Chief Executive

Appointed: April 2016

Career and external appointments: Steve joined M&S in 1989 and worked in senior roles across all areas of the business prior to his appointment as CEO, including Director of Home, Director of Retail, Director of Retail and E-commerce,Executive Director, Food, and Executive Director, General Merchandise. Steve is Chair of the Business in the Community ('BITC') Place Leadership Team. In addition, he sits on the Board of the Consumer Goods Forum, which brings together leaders from global retailers and manufacturers.

Eoin Tonge

Chief Financial Officer

Appointed: June 2020

Career and external appointments: Eoin joined the business from Greencore, where he had been CFO since 2016.

At Greencore, he oversaw the divestment of their US operations, strengthening the company's balance sheet, returning capital to shareholders and simplifying the business. Prior to that he was MD of Greencore's Grocery business and also worked in a variety of roles across strategy, finance, treasury and capital markets at Greencore and previously Goldman Sachs.

Andy Halford

A N

Senior Independent Non-Executive Director

Appointed: January 2013

Career and external appointments: Andy's strong finance background and broad knowledge of the UK and international consumer market was gained from CFO positions held in global listed companies. He is Chief Financial Officer of Standard Chartered, which he joined after 15 years at Vodafone, nine of which were spent as Chief Financial Officer.

Andrew Fisher OBE

R N

Independent Non-Executive Director

Appointed: December 2015

Career and external appointments: Andrew was instrumental in establishing mobile lifestyle app Shazam, where he was Executive Chairman until October 2018, as a leading mobile consumer brand. Andrew brings over 20 years' experience leading and growing numerous technology-focusedenterprises, and is currently Chair of Rightmove PLC.

Full biographical details of each director are available on marksandspencer.com/ thecompany.

  A breakdown of the Board's key skills and experience can be found on p64-65.

Justin King CBE

A N

Independent Non-Executive Director

Appointed: January 2019

Career and external appointments: Justin was Vice Chairman of Terra Firma until May 2021, acting as adviser to the General Partner. Between 2004 and 2014, he was the CEO of Sainsbury's, leading the business through a major transformation. He has also previously held senior positions at M&S as Head of Food, as well as Asda, Häagen-Dazs,PepsiCo and Mars.

  Please see p60-61 for more detail on the Board and Committee governance structure, and meeting attendance.

Sapna Sood

E N

Independent Non-Executive Director

Appointed: June 2020

Career and external appointments: Sapna was, until recently, a senior executive at Compass Group, as the Group Director for International Clients and Market Development business. She has in-depthknowledge of running complex supply chains, including in food and clothing, as well as experience of leading large transformation programmes. She has held leading operational roles in the building materials and industrial gas sectors in Europe and Asia Pacific, latterly as CEO and President of LafargeHolcim in the Philippines. Sapna was also a non-executivedirector at Kering from 2016

to 2020.

Tamara Ingram OBE E N R

Independent Non-Executive Director

Appointed: June 2020

Career and external appointments: Tamara has a longstanding leadership career in advertising, marketing and digital communications, having held leadership roles at WPP since 2002. Prior to this, she worked at Saatchi

• Saatchi where she held the roles of CEO and Chair. Tamara
  has led renowned marketing campaigns for household brands around the world and delivered cultural and business transformation at pace within her own businesses as well as on behalf of clients. She is a non-executive director of Marsh McLennan and Intertek Group, and a Trustee of Save the Children.

62 Marks and Spencer Group plc